Africa has abundant natural resources which can revolutionize the energy sector through taping solar, wind, geothermal, hydropower and other resources. But due to lack of sufficient finance and technology, the continent has remained one of the least per capita modern energy utilizer in the world. Yohannes Gebre Hailu is an expert working at the Economic Commission of Africa in the Division of Private Sector Development and Finance.
As to him, in collaboration with the private sector, ECA has initiated a clean energy development for Africa to develop 10 thousand Megawatt from clean renewable energy sources in the coming 5 years. It has targeted mobilizing 10 billion US Dollar. To meet the objective, the bond known as “green server bond” will be supplied to the market.
Interested private companies will be invited to purchase the bond. Now assessing the task of the bank which handles the selling and promoting process is underway. Some banks from Europe, United States and Russia and Development of South African Bank show interest to engage in that business. But a decision on the type of currency, via which the transaction of the bond is going to be conducted, has not yet been reached. The American company known as PINCO, engaged in managing 2 trillion dollar, has pledged to purchase bond. So far, it has invested its money in various sectors. Most companies have the capacity to make impact with limited money. If PINCO and other companies subscribe, they can purchase the entire 10 billion Dollar bond. According to Yohannes, the clean energy initiative for Africa aims at accelerating the private sector’s finance for renewable energy in a bid to render sustainable development in Africa faster and better.
It as well aims at strengthening and upgrading transmission systems. The initiative is a mechanism built on three pillars sustainability, governance and finance to bring together countries, financers and developers of clean energy projects. This helps to align interests and combine scale and speed to fast-track financing from the private sector for deployment of clean energy in Africa.
Ethiopia is one of the interested African countries. In July 2019, a high level political forum was organized by the United Nation. During the discussion the Minister of Water Electric and Energy Dr. Sileshi Bekele had made clear Ethiopia’s commitment to develop renewable energy. Projects targeting exploiting wind and solar energy are also publicly revealed.
Till now, 8 African countries have become part of the initiative. The projects of the short listed countries are evaluated based on their energy renewability, cleanness, feasibility and sustainability. When they are confirmed private companies get the loan and get green light to launch the projects. When the private sector comes with its own resource for carrying out projects, it must accept the possible risks that might appear. Hence, governments must show their will to provide guarantee. In addition, they must negotiate whether there is an enabling environment in the areas of exchange rate of USD against the local currency, tax holidays, labor cost and the availability of sufficient infrastructural facilities. As private companies don’t get the money from the capital market, they invest their own money. The amount of risk also differs from one another.
The matter is not yet discussed in detail. But the final accomplishment depends on the political will of the governments. Part of the commitment of the governments is subjecting the energy projects to peer evaluation. For example, Ethiopia should pass through such scrutiny and this minimizes risk costs.
As mentioned above, the clean energy initiative intends to mobilize 10 billion Dollar from private sector and energy but the country’s energy potential, legal system, infrastructural development and demand display disparity. Asked whether the 10 thousand megawatt power generation is proportionally generated or not Yohannes said that, the short listing of countries in the energy initiative assumes three things.
The first one is how the nation has committed itself to the development of clean energy and how the commitment is manifested in the country’s energy policy, how the policy accommodates foreign private investment and whether there are constraints or opportunities. However, if there are more constraints there is no immediate cancelation. Rather the country will be given another chance. The last thing considered in this regard is that how the pipelined projects are undergoing. The applicant countries have to compete based on these criterion. The winners will be registered. After the endorsement of the projects the countries have the mandate to decide the amount of power generation. For example, if a given country wants to generate 2,000 megawatt, it can get that based on the construction cost. It is advisable that countries start implementing projects from small ones, which are manageable and when they succeed they can move to the bigger ones and secure the loan.
But, if they initially go for big projects the matter could get complicated. Also, each country needs to differ one from other. Some need to generate power while others need to construct infrastructural facilities. For example, countries such as Mauritania and Senegal have showed interest pertaining to the expansion of network.
Mauritania’s geographical area is vast with very small population density and the country’s priority is to expand infrastructure rather than generating power. But countries, such as Ethiopia, prioritize power generation rather than expanding infrastructural facilities. The clean energy generation endeavor in addition to filling the gap of power deficit; it can create job opportunities and helps mitigating climate change and global warming.
The exploding youth population of the continent unless absorbed by the emerging manufacturing industries it might be liability rather than an asset. In this case, power generation broaden the industries’ employing capacity because currently power shortage and interruption have crippled industries not to produce at their full capacity.
On the other hand, global warming and climate change have made the continent to look forward by changing the challenge in to opportunities. The untapped renewable energy sources mentioned above serve both for supplying energy and mitigating climate crisis brought by carbon emission released from none renewable energy sources. The sources include coal and benzene or byproducts of petrochemicals. The renewable energy sources replace the carbon-based sources and serve to build Climate Resilient Green Economy which Ethiopia aspires to attain by 2030.
The Ethiopian Herald April 12/2020
BY ABEBE WOLDE GIORGIS
